Ames v. American Nat. Can Co.
| Decision Date | 28 April 1999 |
| Docket Number | No. 97-4055,97-4055 |
| Parties | Pens. Plan Guide (CCH) P 23952G Sandra AMES, et al., Plaintiffs-Appellants, v. AMERICAN NATIONAL CAN COMPANY, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Peter A. Steinmeyer, Lee T. Polk (argued), Ogletree, Deakins, Murphy, Smith & Polk, Chicago, IL, for Plaintiffs-Appellants.
william D. Heinz (argued), Jenner & Block, Chicago, IL, for Defendants-Appellees.
Before FLAUM, MANION, and DIANE P. WOOD, Circuit Judges.
In 1995, American National Can Company ("ANC") decided to sell its Food Metal & Specialties Division ("Food Metal") to Silgan Containers Corporation ("Silgan"). This case concerns the benefits to which certain salaried employees of Food Metal believed they were entitled as a result of that event under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. ANC saw things differently, and so the employees sued, alleging claims for severance pay, pension benefits, and damages for a violation of the ERISA ban on interfering with protected rights. They also alleged that ANC had violated the disclosure rules under ERISA and that the plan fiduciaries had breached their duty to the plaintiffs. The district court ruled in ANC's favor, finding that the plaintiffs had failed to exhaust their internal remedies under the plan, that there was no breach of fiduciary duty, and that, with one exception the court thought did not require a penalty, ANC had not breached its disclosure duties. We affirm.
ANC is a plan sponsor of a number of employee benefit plans that fall within the ambit of ERISA. The plans at issue here are the ANC Pension Plan for Salaried Employees ("Pension Plan") and the ANC Severance Pay Plan ("Severance Plan"). The plaintiffs, who are proceeding together, but not as a certified class, are 169 former salaried employees of ANC who worked in the Food Metal Division. They were all participants in both the Pension Plan and the Severance Plan.
In early 1995, ANC made the business decision to sell Food Metal to Silgan. Personnel issues loomed large, as they frequently do, and ANC went to some lengths to work out how the Food Metal employees would make the shift over to Silgan. On March 29, 1995, the ANC Retirement Board, which acted as the plans' fiduciary, amended the Pension Plan to provide a sweetened early retirement option for certain employees of the corporate staff department. Later, on October 16, 1995, the Board amended the Severance Plan to provide additional payments for people eligible for the early retirement plan. None of the plaintiffs satisfied the eligibility criteria the Board had established for these special programs.
The plaintiffs instead fell within the group of employees that ANC was trying to preserve so that it could transfer Food Metal as a going concern to Silgan. On June 2, 1995, ANC entered a formal asset purchase agreement with Silgan. One of the terms committed ANC to take all reasonable steps to ensure that the Food Metal employees would be available to Silgan; it promised, in effect, not to cherry-pick employees from Food Metal by allowing them to transfer to other divisions of ANC without Silgan's prior consent, and it promised not to lure the Food Metal employees into early retirement by offering sweeteners to them. The new "blocking" policy on intra-ANC transfers represented a change from past policies.
ANC publicized the impending benefits changes to the affected employees in a number of ways. It held a series of informational meetings during which the changes were explained orally to the employees. Paul Kron, ANC's Senior Executive Vice President and Chief Operating Officer, Food and Healthcare, also sent a letter to all salaried Food Metal employees on June 23, 1995, explaining the impact of the sale to Silgan on their benefits. Last, ANC sent individualized communications to each salaried employee, including all the plaintiffs, calculating individual pension estimates for each one and explaining the pension, severance, and other benefits they would receive after leaving ANC.
Before the sale, Dennis Bankowski, ANC's Vice President of Human Resources and Chairman of the Retirement Board, and Jack Schemm, Vice President of Employee Relations, traveled to Silgan's California headquarters for a meeting. One topic discussed at that meeting was the benefits package Silgan planned to offer the Food Metal employees who accepted Silgan employment. After reviewing the materials made available to them, Bankowski and Schemm concluded that the benefits to be offered by Silgan were roughly comparable to those provided by ANC. In his letter of June 23, 1995, Kron accordingly informed the recipients that "[t]he [ANC and Silgan] programs are not identical and individuals may be affected in different ways, but in the aggregate, the total value of the programs of the two companies is very comparable."
After the sale, Silgan offered continuing employment to virtually everyone in the plaintiff group. (Four were able to remain on ANC's payroll and take early retirement, which they did.) The hourly employees (none of whom are in the plaintiff group) eventually negotiated an agreement with ANC under which not only was their ANC service recognized for purposes of their Silgan benefits, but they also secured certain pension enhancements under which some of their post-sale Silgan service was credited to their ANC pension accounts.
At the time of the sale, the Severance Plan provided employees a certain amount of severance pay if they were terminated without cause. Before the sale to Silgan was finalized, however, ANC informed the plaintiff group that they would not receive severance pay from ANC, with one exception. Silgan agreed that if it laid off any of the transferred employees within one year of the sale, it would pay that person the severance pay to which she would have been entitled under the ANC plan, rather than the lesser amount the Silgan plan would offer. (In the end, 15 employees took advantage of this option.) The ANC plan said that no severance pay would be given if
the Employee transfers to a successor Company (or affiliate thereof) without an interruption in employment, or the Employee refuses a reasonable job offer with a successor Company (or any affiliate thereof) which does not require a relocation.
It was ANC's position that even though the employees were technically terminating their employment with ANC and being "rehired" by Silgan (which had reserved the right not to hire people it did not want), the transfer from ANC to Silgan qualified as a transfer to a successor company without an interruption in employment. Just to be extra sure, the Board retroactively amended the plan on October 16, 1995, to provide that "[a]n organization shall also be considered a 'Successor Company' of the Company if it is so designated by the Company as such for the purposes of this Plan."
The plaintiffs did not take advantage of the internal plan appeals processes for either of the benefits they believed had wrongfully been denied to them: the failure to give them the same bridging benefits that the executive office personnel were offered, and the failure to pay severance benefits upon the end of their ANC employment. They did seek information from ANC, through counsel, by means of a letter dated April 1996, but ANC was not as forthcoming as they believed it should have been. In August 1996, their lawyer sent a follow-up letter, requesting more documents and a meeting. ANC replied that it had provided all the documents it was required to furnish, and that it would agree to a meeting if plaintiffs' counsel provided a list of the issues to be discussed. No such list was ever provided, nor did plaintiffs get the documents they wanted until the discovery phase of this litigation.
On appeal, the plaintiffs have limited themselves to three broad points: first, they claim that the district court erred when it held that the only way in which ANC violated the ERISA disclosure rules was by failing to provide the Severance Plan, and that it abused its discretion when it declined to award a monetary penalty for this omission; second, they argue that the court should not have granted summary judgment for the defendants on their breach of fiduciary duty claim; and third, they urge us to find that the district court abused its discretion in dismissing their claims for severance pay and interference with ERISA benefits because of the blocking policy, on the ground that they had failed to exhaust plan remedies. We take these arguments in reverse order.
Counts IV and VI of the plaintiffs' complaint alleged, respectively, that the defendants failed to pay benefits owed to the plaintiffs under the Severance Plan and that the defendants' "blocking policy" violated 29 U.S.C. § 1140 in that it was "intentionally calculated to prevent Plaintiffs from continuing their employment with ANC and thereby maintain superior employee benefits with ANC, as well as attain various benefit enhancements." These are the counts that the district court dismissed for failure to exhaust internal plan administrative appeals--an omission that the plaintiffs concede and have attempted to excuse.
While a requirement to exhaust internal plan remedies is not specifically written into ERISA, courts have held that exhaustion is ordinarily a useful prelude to a lawsuit. See Lindemann v. Mobil Oil Corp., 79 F.3d 647, 650 (7th Cir.1996) (citing cases). Several compelling reasons support this position: the plan's own review process may resolve a certain number of disputes; the facts and the administrator's interpretation of the plan may be clarified for the purposes of subsequent judicial review; and an exhaustion requirement encourages...
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